Governing global risks: The evolution of policy capacity in the financial sector

Despite the fragility of authoritative governing institutions at the international level, the politi-cal capacity to deal with global risks is developing. The sense of legitimacy that will ultimately derive from a deeply transnational sense of shared fate continues to lag, but even in that regard a process of progressive development is underway. Such an argument becomes defensible after the relationship between risk and uncertainty is understood, after the dynamic interaction of political conflict and functional spillovers is examined, and especially after distinctions are made among the variegated politics of risk measurement and assessment, of compensation and prevention, and of management and resolution. After outlining such conceptual issues, the plausibility of the argument is probed here in a most sensitive arena of contemporary policy-making, namely in the political economy of well-functioning global financial markets. The experience of international crisis management around the year 2008 is especially illuminating. The building of global policy capacity in this arena is a reversible process, but the circumstances under which such a reversal might occur are becoming increasingly implausible.